I was handed a computer to repair a few days ago and was told that it crashed frequently and ran really slow. I plugged it in and it seemed alright at first until the operating system loaded. The mouse and keyboard are both unresponsive. Before the OS loads they work just fine. The BIOS settings are all at default which allow USB ports to work and all that. The keyboard and mouse both work just fine since I use them on my own rig. The computer is a DELL Dimension E520. everything is standard. In the back there are no PS\2 ports so I am at a wall there. I tried to use the remote connection utility with no luck as well.
Then my friend i bet is the windows setup. make a clean install and try again. this happened to me once and it was fixed with clean install. First i highly suggest you to boot from a windows xp cd(hirense boot cd) and see if mouse works there i bet it will.